2. Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, Dated

2. Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, dated 14 October 2015

The Portfolio Committee onLabour, having considered the performance and submission to National Treasury for the medium term period of the Department, reports as follows:

1. Introduction

1.1.Mandate of Committee

In terms of the Constitution of the Republic of South Africa, portfolio committees have a mandate to legislate, conduct oversight over the Executive and facilitate public participation.

The mandate of the Portfolio Committee on Labour (the Committee) is governed by Parliament’s mission and vision, the rules of Parliament and Constitutional obligations. The mission of the Committee is to contribute to the realisation of a developmental state and ensure effective service delivery through discharging its responsibility as a committee of Parliament. Its vision includes enhancing and developing the capacity of Committee Members in the exercise of effective oversight over the Executive Authority. The Committee is charged with the responsibility of holding the Executive and related entities accountable through oversight of objectives of its programmes; scrutinising its budget and expenditure (annually); and recommending through Parliament what actions the Department should take in order to attain its strategic goals and contribute to service delivery.

Furthermore, section 5 of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 (the Act) provides that the National Assembly, through its committees, must annually assess the performance of each national department and these Committees must annually submit Budgetary Review and Recommendation Reports (BRRR) for tabling in the National Assembly. These should be submitted to the Minister of Finance and the relevant Ministers.

1.2.Description of core functions of the Department.

The mandate of the Department is to regulate the labour market through policies and programmes developed in consultation with social partners, which are aimed at:

• Improved economic efficiency and productivity;
• Creation of decent employment;
• Promoting labour standards and fundamental rights at work;
• Providing adequate social safety nets to protect vulnerable workers;
• Sound labour relations;
• Eliminating inequality and discrimination in the workplace;
• Enhancing occupational health and safety awareness and compliance in the workplace; and
• Giving value to social dialogue in the formulation of sound and responsive legislation and policies to attain labour market flexibility for competitiveness of enterprises which is balanced with the promotion of decent employment.

1.3.Purpose of the BRR Report

The Act sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national department. In October of each year, portfolio committees must compile BRRR that assess service delivery performance given available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations of forward use of resources. The BRRR are also source documents for the Standing/ Select Committees on Appropriations/ Finance when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.

1.4.Method

The Committee in reviewing the work of the Department for the 2014/15 financial year placed emphasis on the following aspects:

• An overview and analysis of the Department’s strategic priorities and measurable objectives;
• An overview of the overall performance of voted funds: Vote 18;
• Consideration of the Auditor-General’s activities in relation to the Department;
• Committee key findings; and
• Recommendations.

The Committee, in undertaking this process used a number of source documents, including the 2014-2019 Strategic Plan of the Department, Annual Report, Financial Statements, 2015 Estimates of National Expenditure (ENE), briefings by the Department and its entities during the course of the year, presentation by Researcher from the Appropriations Committee, as well as the State of the Nation Address. The Committee also used the Constitution as its basis.

The Committee held meetings with the Department and its entities to receive presentations on their performance against their annual plans. It also invited the Auditor-General to brief it on its assessment of performance of the Department and its entities.

1.5.Outline of the contents of the Report.

This report is comprised of the broader government policy, which is enshrined in the National Development Plan. It reviews the initiatives taken by the Department to ensure that the priorities of the plan are realised. Furthermore, the report reviews the recommendations made in the previous year’s BRRR to ascertain whether they have been acted upon. It also looks at the recommendations made by the Committee regarding the 2015/16 budget. The report assesses the financial as well as service delivery performance to ascertain whether the budget allocated to the Department was spent as envisaged in the Annual Performance Plan. Finally, it summarises the observations made by the Committee after considering all necessary documents, presentations and oversight visits before making recommendations aimed at improving service delivery.

1. Overview of the key relevant policy focus areas

The National Development Plan (NDP) has been identified as a roadmap to a South Africa where all will have access to services and jobs.

The economy and employment related priorities of the NDP, include increasing employment through economic growth; reduce inequality; improve skills development and education.

Another relevant focus area for the Committee is the reduction of income inequality, which involves an investigation into the national minimum wage. The Committee completed this process through workshops on national minimum wage, which involved experts in this area as well as public hearings held on a national scales to ascertain the views of the public on this subject matter.

Improvement of UIF benefits to better the lives of beneficiaries, especially women, is another key focus area relevant to labour. These include:

• Increased benefits to beneficiaries;
• Increased benefits period from eight months to 12 months;
• Women on maternity leave to be paid at an income replacement rate from 38 per cent to 66 per cent; and
• Increase in the time for claiming UIF from six months to 18 months for death benefits and 12 months for other benefits.

The Unemployment Insurance Amendment Billhas been tabled before Parliament and referred to the Portfolio Committee on Labour for processing.

1. Summary of previous key financial and performance recommendations of Committee

3.1.2014/ 15 BRRR recommendations

Having assessed the performance of the Department in 2014/ 15, the Committee recommended that the Minister of Labour should consider the following:

3.1.1.Financial performance including forward funding recommendations

• Recommendation:

Productivity SA and the UIF must speedily resolve delays in funding transfers as this has impact on the entity’s key programme.

Response of the Department:

The Fund is finalizing the funding agreement between Productivity SA and the Fund. An agreement was reached with regards to the funds which will be transferred to Productivity SA on an annual basis to enable them to execute the Turnaround Solutions program during Exco on the 15 September 2015.

• Recommendation:

The CCMA has to establish appropriate supply chain management policies and ensure that sufficient measures are in place to detect and prevent supply chain management irregularities.

Response of the Department:

The matter is receiving attention.

• Recommendation:

The Department and all its entities must report quarterly to the Committee to ensure that the quarterly expenditure improves.

Response of the Department:

Ongoing

• Recommendation

The Department must monitor and ensure that Inspection and Enforcement programme’s expenditure increases to ensure that more inspectors are hired and are provided with appropriate tools of trade such as vehicles and laptops.

Response of the Department:

The matter is receiving attention.

The Department will receive R64 million in 2016/17 and will get back the money that was taken from it in the 2017/18 financial year. In 2016/17 no additional funding will be provided. Meetings have been conducted with National Treasury but it was made clear that there is no additional funding available during next year except for the R64 million for additional staffing.

• Recommendation:

The Department must report to the Committee on a quarterly basis on progress made with regard to filling of vacant funded posts.

Response of the Department:

The establishment of the Department is being reviewed and approval is being sought to abolish unfunded posts. The submission is in the pipeline.

3.1.2.Performance related recommendations with financial implications

• Recommendation:

In view of the challenges faced by the Compensation Fund, it is recommended that the Minister ensures that the entity comes back within three weeks to brief the Committee on plans to remedy its problems. A tentative date of 5 November was identified.

Response of the Department:

The Fund is ready to provide an update as and when it is requested.

• Recommendation:

The Minister ensures that the CCMA services are accessible to the most vulnerable people in rural and other outlying areas.

Response of the Department:

Some actions in connection to this proposal are already being implemented.

• Recommendations:

The CCMA’s job saving functions, through the Training Layoff Scheme, must be extended to rural areas to curb growing rural unemployment rates. The Department must simplify the procedure for accessing the Training Layoff funds.

Response of the Department:

No response.

• Recommendation:

The CCMA and the Department must ensure that Labour Centre staff is suitably trained to render advice on services offered by the CCMA.

Response of the Department:

Commenced and ongoing.

• Recommendation:

The Minister should ensure that Nedlac provides a thorough briefing on the special audit report on irregularities within the entity.

Response of the Department:

The outstanding aspects of the report are being finalized.

• Recommendation:

Nedlac must report back to the Committee on its detailed financial performance for 2013/14 and also present on its 2013/14 quarterly performance.

Response of the Department:

The matter is receiving attention.

• Recommendation:

The Department must engage Treasury to consider increasing the Productivity SA’s budget in order to address challenges of ageing IT infrastructure and the funding of its turnaround solutions programme, given that this programme is key in employment creation as it assists companies in distress.

Response of the Department:

The National Treasury did not accept any new bids from the Department, including from its entities for the 2015/16 and 2016/17 financial year due to the current economic situation. Instead the Department baseline was reduced. The Department has however assisted the entity to secure additional funding for Turnaround Strategies to save jobs from the UIF to the tune of R58.5 million during 2014/15 and R62 million for 2015/16.

• Recommendation:

The Committee is urging the Department to urgently resolve the discrepancy with Treasury and organisations representing the disabled, so that people with disabilities receive benefits due to them.

Response of the Department:

The Department requested Treasury to consider approving the continuation of the current disability scheme for the next 3 years i.e. 2015-2018 to provide for the new policy development and phasing out current arrangements. The Treasury formally approved during May 2015 the continuation of the scheme till end of 2017/2018 financial year.

• Recommendation:

Due to the challenges faced by vulnerable groups, we propose that the number of inspectors in different categories should be increased.

Response of the Department:

The matter is receiving attention.

• Recommendation:

The Committee further recommends that the budget cut for IES be reversed and the Committee will request the Department to table a detailed plan with time frames as to how the money will be spent.

Response of the Department:

R64 million will be received in the FY 2016/17 and will equate to an additional 124 inspectors (45xEE inspectors and 79xOHS inspectors). This figure is made up of CoE and G&S. A project Team has been put in place and a project plan has been drafted. The team will meet almost monthly and will monitor the appointment of the staff. Further progress reports will be made available during the course of the year.

3.2.2015/16 Committee Budget Report

3.2.1.After receiving the presentation of the Department of Labour, the Committee recommended that the Minister of Labour gives consideration to:

• Ensuring the ongoing alignment of the budget expenditure with the policy priorities of Government programmes as articulated in the NDP.
• Ensuring that the plan for the recruitment and retention of inspectors contribute to strengthening the goal of decent work in South Africa.
• Increasing the capacity of the inspectorate while recognising the specialised nature of the Occupational Health and Safety.
• The Director General as the accounting officer engaging with and regularly reporting to Parliament on the expenditure trends and strategic plans of the DoL entities including budget surpluses and investments undertaken.
• The Department, in its monitoring and evaluation function, to encourage job creation by all its entities.
• After receiving the presentation of the CCMA, the Committee recommended that the Minister of Labour gives consideration to:

• The identification of future permanent sites for CCMA offices that should take into account the accessibility to poorer communities. It should also tighten its financial control on lease and other large commitments.
• The CCMA engaging with the Committee on the operation and functioning of the Essential Services Committee.
• The timing of engagement by the CCMA with stakeholders with regard to industrial strikes.
• After receiving the presentation of NEDLAC the Committee recommended that the Minister of Labour gives consideration to:

• Reviewing the expenditure of NEDLAC as it relates to goods, services, consultants and telephone allowances especially for Senior Managers.
• NEDLAC providing a plan to address the shortage of skills, including importation thereof, to ensure decent employment through inclusive economic growth.
• Improving financial controls on spending.
• After receiving the presentation of the UIF, the Committee recommended that the Minister of Labour gives consideration to:

• The financial sustainability of the UIF with regard to the Minister of Finance’s proposal in the 2015 National Budget for a temporary reduction in contributions by employers and employees to the UIF.
• Rolling out advocacy programmes for domestic workers on UIF.
• After receiving the presentation of Productivity SA, the Committee recommended that the Minister of Labour gives consideration to:

• Increasing the budget allocation of and work on a plan for Productivity SA to become more financially independent.
• Productivity SA establishing partnerships with organisations within its scope of work.
• Developing a plan to be more visible in the outlying provinces.
• After receiving the presentation of the Compensation Fund, the Committee recommended that the Minister of Labour gives consideration to:

• Addressing the ineffective information and communications technology systems that are currently being used by the Compensation Fund, in order to improve service delivery, storage of documents and missing claims.
• Ensuring that the plan for the recruitment and retention of staff and interns are implemented to address the backlogs of cases and delays in the implementation of the full decentralisation process.

1. Overview and assessment of financial performance

4.1.Overview of Vote allocation and spending (2011/12 to 2016/17)

Programme
R million / 2011/12 / 2012/13 / 2013/14 / 2014/15 / 2015/16 / 2016/17
Audited / Audited / Audited / Main
Appropriation / Final Appropriation / Actual Expenditure / Main / Estimates
Administration / 704.3 / 687.7 / 795.9 / 787.7 / 764.9 / 675.9 / 845.1 / 903.8
Inspection and Enforcement Services / 375.5 / 395.6 / 412.2 / 403.2 / 432.4 / 430.9 / 430.8 / 587.3
Public Employment Services / 332.2 / 331.7 / 413.5 / 466.5 / 481.5 / 465.3 / 488.3 / 535.0
Labour Policy and Industrial Relation / 594.9 / 619.7 / 749.9 / 869.9 / 867.4 / 847.8 / 922.7 / 972.1
Total / 2 007.1 / 2 034.6 / 2 371.4 / 2 527.3 / 2 546.2 / 2419.9 / 2 686.9 / 2 998.2

Source: National Treasury (2015), Estimates of national Expenditure

The main allocation of the Department was R2.52 billion in the 2014/15 financial year. The budget was adjusted upwards to R2.54 billion. The increase in the overall budget was significantly as a result of upward adjustment of the budgets for Inspection and Enforcement Services and Public Employment Services, which were adjusted from R403.2 million to R432.4 million and R466.5 million to R481.5 million, respectively.

In the 2015/ 16 financial year, the Department received a total budget of R2.68 billion. The Labour Policy and Industrial Relations programme received the largest share at R922.7 million. It was followed by the Administration programme at R845.1 million.

4.2.Financial performance 2014/15

The Department of Labour had a 2014/15 available appropriation of R2.54 billion which represented a nominal increase of R174.8 million or 2.5 per cent from 2013/14 final appropriation of R2371.4.

Transfers and Subsidies accounted for R936.482 million of the available budget and Current Payments accounted for R1.5 billion of the Departmental budget. Payment for capital assets accounted for R37.5 million. In terms of economic classification, the Department spent 92.8 per cent of current payments budget, 98.7 per cent of transfers and subsidies and 96.1 per cent of payments for capital assets budget. In total, the Department spent 95 per cent of its budget.

The largest expenditure item in 2014/15 was R847837 million spent under the Labour Policy and Industrial Relations programme.This comprised 35 per cent of the departmental budget. It translated to an increase of 3.4 per cent from the 2013/14 programme expenditure. The next largest element of expenditure was R675 957 million under the Administration programme. This comprised 27.9 per cent of the departmental budget, but was a decrease of 5.6 per cent from the 2013/14 programme expenditure. Public Employment Services spent, which was 19 per cent of the departmental budget. It translated to a nominal increase of 1.8 per cent from the 2013/14 programme expenditure.Enforcement Services programme spent R430 878 million or 17.8 per cent of the departmental budget in 2014/15. This was an increase of 0.4 per cent from the 2013/14 programme expenditure.

The Departmental expenditure has grown by a nominal amount of R48 492 million or two per cent, when compared to the previous financial year. Rand value expenditure growth was greatest in the Inspection and Enforcement Services programme. The least expenditure as a percentage of the final appropriation was on Administration programme at 88.4 per cent.